Boston Sweet Digs

July 11, 2008

Appraising the Appraisal Websites

zillow1 Appraising the Appraisal Websites
People are always carping about the inadequacies of Zillow, the home valuation website that consistently seems to undervalue property by several thousand dollars if you’re a seller. (If you’re a buyer, on the other hand, Zillow home values seem insanely high).

If you check out the Zillow website, you’ll find comment after comment from sellers enraged because Zillow appraises their homes at $500 less than the guy with the same house across the street.

But is all the rage worth it?

 I would suggest that relying on Zillow, or any of the other popular home valuation websites, (Cyberhomes.com or Eppraisal.com to name two) is folly. The only way you can really know a home’s value is to do a whole lot of looking yourself, so that you can practically recite a neighborhood’s home values in your sleep.

At the time that we bought our Brighton condo, the Zillow estimate was laughably out-of-date.  Zillow’s “zestimate” was about $70,000 less than asking price — ridiculously low in comparison to everything else on the market. So I ignored it. Today, Zillow estimates my condo’s value at around $329K ($3,000 less, by the way, than the exact same condo one floor below) while Cyberhomes says its worth $308,050 and Eappraisal says something between $269K and $364K. Bank of America says anywhere between $160K to $366K. How’s that for a range?

Why so much variation? Different algorithms, I guess. But next time you check on your home’s value on one of these sites, pay close attention to the comps, not just the big round number at the top of the page. A comp that has nothing to do with your place (because its a different kind of housing stock, or actually located in a different nearby town) throws everything off. And of course, there are all those factors that Zillow and the others don’t know anything about — your renovated kitchen, your beautiful view, the private outdoor space that you’ve got while your neighbors don’t. In other words, you’ve got to keep these home valuation sites in perspective.

Here’s a look at three houses open for showings this weekend, and their various appraisals, according to the websites:

7 Bagnal Street, #1
Allston
BEDS:2/BATHS:1
Sq. Ft: 1,117
$329K
O.H. Sunday, July 13, 2008 12:00 PM – 1:30 PM
Zillow: $307K
Cyberhomes: $299,079
Eppraisal: $338,535 ($287K-$389K)
Comment: Considering the space and condition of the property, this asking price seems pretty fair. What the home valuation websites can’t factor in is that this condo is nowhere near the T.

14 Browne Street, #1A
Brookline
BEDS:2/BATHS:2
Sq.Ft:1,405
$575K
O.H. Sunday, July 13, 2008 12:30 PM – 2:00 PM
Zillow:$561K
Cyberhomes:$565,701
Eppraisal: $509,875 ($433K-$586K)
Comment: This condo is in a basement. Do the appraisal sites take that into consideration? At these estimated values, it doesn’t seem so!

551 Brookline Ave, #2
Brookline
BEDS:3/BATHS:1
Sq.Ft:1213
$459K
O.H. Sunday, July 13, 2008 1:00 PM – 2:30 PM
Zillow: $465K
Cyberhomes: $395K
Eppraisal: $436,269 ($370K-$501K)
Comment: This price is a good one for a condo of this size in Brookline. No doubt a busy road keeps the price down, but this time, Zillow seems to have it just right.

On the Market on Cummings Road
Boston Sweet Digs Home

Posted by pamela.reynolds on July 11, 2008 3:27 AM | del.icio.us | Digg

  • Joel
    Under the estimates from Zillow etc are the listing and sales comps and value estimates by Redfin.

    I've noticed an upward adjustment since early July, sometimes lopsided with sales over listing and/or much higher than the three online estimates.
  • Redfin reports estimates offered by Zillow, Eppraisal and Cyberhomes on their websites. Each of these compamies revise their estimates periodically and each may have very well changed something about their algorithm. You'd have to ask them specifically.In Boston, I have noticed that they have raised the price of my own condo since I originally wrote this post, perhaps reflecting the fact that Boston home prices have held far steadier than in other regions around the country...
  • Joel
    Was there an algorithm revision at Redfin recently? I think the estimates have generally gone up
  • Thanks Brett,

    I have also used the feature that allows for a more accurate estimate by editing home facts, so that's a very useful thing for folks to remember. As much as these sites can vary, I think they are an invaluable service to homebuyers... so much information, right at your fingertips!
  • Brett Shaw from Cyberhomes:

    Hi Pamela. Thanks for addressing Cyberhomes!

    It is difficult for any home valuation site to be completely accurate because of inaccurate public records and lack of information. Cyberhomes, however, is owned by Fidelity National Financial (which houses the largest title agency and is the largest provider of MLS services) so we fundamentally have more content from within the FNF family of companies from which to aggregate our data. The site has more than 100 million records and we update more than 575,000 new ownership records every month, verified from the original source.

    "there are all those factors that Zillow and the others don’t know anything about — your renovated kitchen, your beautiful view, the private outdoor space that you’ve got while your neighbors don’t."

    Cyberhomes.com allows visitors edit a specific homes' facts in order to get a more accurate estimate. Included in this is the ability to adjust for renovations and other facts including view, deck addition, and kitchens. There is also an option for "other" where you can enter in whatever updates you've made. Spending a little time with these adjustments is a good idea.

    Once you get to a home's page, click on the "refine" link. This takes you to the adjustments page where you can enter in basic facts, home improvements, and market and home conditions.

    All this data along with the thousands of records from Fidelity National Financial gives a much more accurate "estimate." Cyberhomes gives visitors a value along with a range.

    That being said, this is still just that, an estimate. It is designed to be a tool to help buyers and sellers in their purchase or sell decision. The real value of this site is the vast amount of other content such as ecomonic trends, school information, etc.

    Most people stay on our site for more than 30 minutes! Just enter in an address or zip code and take a look around. You'll see why this happens.
  • Thanks David for all the great info on the inner workings of Zillow. A lot of us have been puzzled about the strange divergences in estimates we sometimes see. I'm also relieved to hear that the listed comps aren't directly used to come up with the Zestimate, since many "comps" don't seem all that comparable. Finally, I think it's especially useful for sellers to know that there is a way to address inaccuracies. Thanks again for the clarifications!
  • PS. Pamela - check this out. Next time you link to Zillow (thanks BTW), try adding this to the link; “?scrnnm=Redfin” like so;

    www.zillow.com/mortgage?scrnnm...
  • Hi Pamela, it's David from Zillow,

    "Why so much variation? Different algorithms"

    Yes! Just like 3 Realtors will come up with 3 different CMA's, so will 3 algorithms generate 3 different estimates. Besides algorithms, different data providers also play a part in this variance between AVM's.

    "But next time you check on your home’s value on one of these sites, pay close attention to the comps"

    No, the comps are purely informational and aren't an indicator of the accuracy of the Zestimate. The comps listed on Zillow are not used directly to estimate the home's value in the way a Realtor would. Rather, the algorithm tries to identify trends by analyzing all recent sales.

    A note to sellers: If your home's facts on Zillow are incomplete or the public records are incorrect, when you post your listing on Zillow, your posting will update our database. And when we next we calculate Zestimates, your updates will be considered by the algorithm. Measurable updates could increase your Zestimate's accuracy.
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